Why Use Weighted Averages?
Weighted averages are used in many different ways when evaluating an employee’s performance. Human resource managers and supervisors use weighted averages in HR performance appraisals to evaluate all aspects of an employee’s performance with respect to the importance each factor has to the business.
Companies may choose to assign different weights to HR performance factors, and these weights may not be equally aligned across companies or even industries. However, companies understand that all performance factors are not equally important and use weighted averages in HR performance appraisals to obtain a better, more-rounded picture of the employee and his or her successes and failures.
This article identifies a few of the common ways that HR departments use weighted averages when evaluating employee performance. Some of these more common weighted averages include 360-degree feedback evaluations, productivity measures, and employee attendance records. Although the weights might be applied differently, the following examples illustrate how weighted averages are used when evaluating an employee’s performance and other HR metrics.
When a company utilizes a 360-degree feedback tool, they are gathering performance reviews and opinions from a variety of sources. Usually, these sources include, but are not limited to, the managing supervisor, immediate peers, first-hand clients or customers, and other teams’ members and/or supervisors with whom the employee interacts with frequently.
Obviously, an HR manager or supervisor might not want to place equal weight on all feedback sources because some might not be as important or critical to business success as others. Therefore, upon receipt of feedback scores from all sources, a final score would be calculated using weighted averages of each individual feedback score.
For example, let’s say an employee received six letter-grade scores from his primary customer (A), immediate manager (B), two peers on his team (C and A), and another team’s manager (B) and peer (D). The order in which these sources are listed are most important to the HR department, so the scores that each reviewer reports are weighted as follows (remember the weights must equal 100%).
- Customer = 30%
- Immediate Manager = 30%
- Peer 1 and Peer 2 = 15% each
- Other Manager and Peer = 5% each
Using the well-known point scale for letter grades (A=4, B=3, C=2, and D=1), the non-weighted performance average for this employee would be 2.83 (C+). However, when applying the weights to each performance review as indicated above, the employee’s weighted performance average would be a little favorable at 3.2 (B-).
NOTE: To calculate a regular average, add all individual scores together and divide the sum by the total number of scores added together. The average above was calculated as follows: (4+3+2+4+3+1) / 6 = 17/6 = 2.83.
NOTE: To calculate a weighted average, multiple each individual score by the percentage for the category, and then add all resulting numbers together. The weighted average above was calculated as follows: (4*0.3)+(3*0.3)+(2*0.15)+(4*0.15)+(3*0.05)+(1*0.05) = 1.2+0.9+0.3+0.6+0.15+0.05 = 3.2
One of the most critical factors in evaluating an employee’s performance rating is how productive the employee has been throughout the review period. Some common productivity measures include actual output, time spent per unit of output, and failures before reaching successful output products. These measures can be weighted equally, or a company may decide that the time spent per unit of output is more important than actual output and failures to reach output. Therefore, the weights might be assigned as follows.
- Time Spent per Unit of Output = 50%
- Actual Output = 25%
- Failed Attempts = 25%
So, let’s say an employee created 100 units in the past year (A), had 30 failed attempts (B), and averaged 15.4 hours per unit (C). The employee’s average productivity score would be 3.0 (B), but his weighted productivity score would be 2.75 (C+).
Another factor that influences the success of a company is the absence rates of employees. Some absences are unavoidable, such as medical or family leave, but others are controllable such as tardiness or unexcused absences. When evaluating an employee’s performance based on attendance records, a company often determines whether an absence is excused (more favorable) or unexcused (less favorable).
For example, if a manager wants to evaluate two employees’ attendance records, the employees’ records might be recorded as follows.
- Employee 1: 17 absences or tardy marks; 20% vacation, 45% excused absences, 20% unexcused absences, and 15% tardiness
- Employee 2: 10 absences or tardy marks; 5% vacation, 15% excused absences, 60% unexcused absences, and 20% tardiness
Although the first employee had significantly more absences, the second employee had far more unexcused absences and tardy marks, which is more detrimental to an organization’s success and turnover rates. Rather than evaluating performance solely on the total number of absence or tardy marks, a manager is in a better position to evaluate the make-up of an employee’s attendance records to identify more problematic employees.
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- Natasha Plowman has over eight years of experience in human resource and related fields, and she holds an M.A. in Human Resources Management.